Employee Fraud: High Risk but Low Priority?

“Forty-five percent of respondents experienced at least one fraud in the (2 year) survey period……(yet) it is clear from the survey that many Australian and New Zealand organisations, including many that have suffered serious fraud loss, have yet to adopt even the most fundamental fraud prevention measures – measures that are usually simple and inexpensive, yet at the same time effective.” KPMG Fraud Survey of 491 Aust. & NZ organisations, 2004

What’s surprising isn’t that fraud is common, it’s that so many organisations still haven’t implemented basic, low-cost fraud prevention strategies. If you’re a manager, reducing risk is part of your core responsibility, whether it’s workplace safety, compliance, financial stability, or fraud prevention. Yet fraud is often the one risk area that gets left behind.

Let’s explore why.

Common Excuses for Ignoring Fraud Risk

Here are some reasons we often hear from managers:

• “It won’t happen to me.”

  A classic case of self-delusion. No business is immune.

• Underestimating the risk.

  Fraud is often invisible until it’s too late.

• “I’d know if something was wrong.”

  You probably wouldn’t. Only 12% of fraud is detected by management (KPMG).

• Assuming staff are preventing fraud on their own.

  Unless it’s in their KPIs, supported by training and systems, they won’t be.

• “I trust my staff, they’re like family.”

  Most frauds are committed by long-term, trusted employees.

• “Staff will be upset if we act.”

  Not if it’s handled well and framed around improving systems and culture.

• Relying on external auditors.

  External audits are not designed to detect fraud. It’s not their role.

The Myth of the Omnipresent Manager

Many leaders believe they’re too “plugged in” to miss fraudulent activity. But unless you’re personally involved at the transaction level (and you shouldn’t be), you won’t see it. Most fraud is uncovered through tip-offs, often long after the damage is done. On average, Australian fraud schemes last 14 months before detection.

Why Your “Super-Employees” Won’t Save You

It’s unrealistic to expect employees to detect and prevent fraud unless they’ve been explicitly asked to and rewarded for doing so. Without clear systems and cultural backing, fraud risk will always be a blind spot.

When Loyalty Becomes a Liability

We all want to believe the best in our people. But the Australian workplace culture of mateship can work against risk management. Fraudsters often exploit exactly that loyalty. A strong internal culture and system of checks and balances actually protect the majority of honest staff.

“Don’t Rock the Boat” Doesn’t Work

Avoiding action because you don’t want to upset staff is shortsighted. A well-designed fraud risk program can actually boost morale, especially when framed as a system improvement exercise. It’s about working smarter, not casting blame.

Where Do You Stand?

Ask yourself: Do any of the above reasons sound familiar? Even a little?

If so, it’s time to act. There’s a lot you can do internally to tighten fraud controls, through improved systems, cultural leadership, and governance practices. But if you’re unsure where to begin or need a fresh set of eyes, we’re here to help.

Contact us today to discuss how we can support you in reducing fraud risk without disrupting your operations.

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Disclaimer:

The information provided in this article is general in nature and does not constitute personal financial, legal or tax advice. While every effort has been made to ensure the accuracy of this content at the time of publication, tax laws and regulations may change, and individual circumstances vary. Dolman Bateman accepts no responsibility or liability for any loss or damage incurred as a result of acting on or relying upon any of the information contained herein. You should seek professional advice tailored to your specific situation before making any financial or tax decision.